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Inside Hulu’s Bold Plan To Lure New Viewers

The streaming service is hoping Seinfeld, Mindy Kaling, and a host of buzzy original shows will help them catch up to Netflix and Amazon.

Inside Hulu’s Bold Plan To Lure New Viewers
Content providers: Hulu’s Lisa Holme (left) and Beatrice Springborn are recharging the company’s programming. [Photos: Dan Monick]

On April 29, Jerry Seinfeld took the stage at New York City’s Hammerstein Ballroom to help TV-streaming service Hulu introduce its new programming to potential advertisers. He was there to make a significant announcement: Hulu had acquired the entire nine-season run of Seinfeld in a deal estimated to be worth $180 million. After breaking the news, the comedian took a few minutes to answer questions from the crowd. “How would Seinfeld be different today?” one audience member asked. “All the media and social and digital capability makes the world a more annoying place,” Seinfeld replied. “What reason would Kramer ever have to come [to Jerry’s apartment]? You lose all of those entrances–he could just text me. The whole show goes in the toilet right there.”

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Hulu was once at the forefront of entertainment’s big digital shift, but in recent years it has lost momentum, and the Seinfeld acquisition is part of a recent push to reclaim its relevance. One of the pioneers of TV streaming, the company launched in 2008 as a collaboration between NBC, ABC, and Fox. But lately it has been eclipsed by its competition: At the time of Seinfeld’s announcement, Hulu had just 9 million subscribers–an impressive 50% increase over last year, but still tiny compared to Netflix and Amazon Prime, which each have more than 40 million in the U.S. alone. Now the company is pouring $750 million into a major expansion effort that also involves original content from well-known creators such as J.J. Abrams and Amy Poehler. “This is a high-risk game for them, but they don’t have any choice,” says tech analyst Roger L. Kay, founder and president of Endpoint Technologies Associates. “They need to raise money, invest, and cross their fingers. They can’t just sit there, because otherwise they’ll be eaten alive by the other guys.”

Hulu’s new strategy follows two failed attempts to sell the company in the past three years. When no buyer emerged (the asking price was reportedly around $1 billion), the networks that own the company decided to rethink their approach. CEO Mike Hopkins brought in a fresh team of executives, including head of content Craig Erwich (previously executive vice president of Warner Horizon Television) and head of originals Beatrice Springborn (a former Pixar development manager). Hopkins also promoted Lisa Holme to VP of acquisitions. Together, they are aggressively pursuing content that’s designed to get people talking–and convince them to pay $8 a month. “We don’t want Hulu to be a utility like your DVR,” says Holme. “We want to be a service people love. We want all that lovey, yummy, brand-y goodness from the programming to spread onto us.”

In the past, audiences may have been turned off by Hulu’s confusing business model, which divided programming into two separate brands: Hulu (free, offering limited content on desktop computers) and Hulu Plus (a monthly fee for a larger array of shows on both desktop and mobile). As part of its overhaul, the Hulu team has decided to nix the Plus, and though there are still free and paid tiers, the branding has been simplified. “Research and tracking convinced us that people were confused,” says Hopkins. “Rather than trying to explain the difference, we want to explain what we have and why you should subscribe. We thought we could do a better job without the poor old Plus.”

The company is also making a big bet on the sort of buzz-generating original content that has been so successful for Netflix and, to a lesser extent, Amazon. Later this year, Hulu will premiere several high-profile programs, including J.J. Abrams’s adaptation of the Stephen King novel 11/22/63, starring James Franco, and the Amy Poehler–produced comedy Difficult People, featuring fellow Parks & Recreation vet Billy Eichner. In May, Hulu also announced it would be producing a new season of Mindy Kaling’s The Mindy Project, which had aired for three seasons on Fox. Also in the works are shows helmed by Juno director Jason Reitman and Friday Night Lights showrunner Jason Katims. “I’ve been to all the Hulu upfronts,” says Seth Meyers, whose animated superhero spoof The Awesomes will soon launch its third season on Hulu, “and all of a sudden, when James Franco and J.J. Abrams are there, it feels like a sea change.”

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In fact, Hulu is a longtime player in original content, with shows like the sports-mascot docuseries Behind the Mask and inner-city teen soap East Los High attracting small audiences after they premiered in 2013. But few people knew about its offerings. “Hulu, ironically, was one of the first services to do original premium programming,” points out Hopkins. “We just didn’t promote it enough.” This time, they aren’t going to make that mistake. The company plans to boost the marketing budget for its new shows by 70% over last year. “We want to show people we can market at the highest level,” says Springborn. “We need to be on our A-plus-plus game every day to compete.” For name-brand showrunners who might otherwise have been wary, that’s an appealing pitch. “Hulu has a lot invested in making these new shows pop for the audience,” says Jason Katims, creator of a religion-themed drama called The Way, which does not yet have a premiere date. “They’re giving us every chance to succeed and to be seen by a lot of people.”

Lisa Holme and Beatrice Springborn

Hulu has also been pouring resources into acquiring popular content from elsewhere, which has long been its primary attraction to viewers. In addition to gobbling up proven hits like Fox’s Empire and CBS’s CSI, the company has made advance package deals that include untested upcoming shows such as AMC’s zombie sequel Fear the Walking Dead and FX’s Denis Leary vehicle Sex&Drugs&Rock&Roll. “It’s a little bit more risk, more reward,” says Holme of such prospective purchases. “We were very careful about who we got into business with in that way, but AMC and FX have such a high hit rate, it minimizes the risk.”

And Hulu does have one important advantage over its competitors: advertising. Unlike Netflix and Amazon, Hulu shows have commercial breaks, and viewers typically watch three brief spots over the course of a half-hour program. That, according to Hopkins, is a key business differentiator. “There’s a huge opportunity in digital advertising,” he says. “There are clearly some customers who don’t like the ads and won’t subscribe because of them, but we’re constantly looking at what we can do to improve the ad experience for viewers.” With digital advertising expected to surpass on-air TV spending by 2017, Hulu is well positioned to cash in. “That’s the trend, and they’re in the best spot to capture it,” says tech analyst Kay, who adds that the company can also promote its original content via ads during popular acquired programs.

Still, it’s Hulu’s newly created shows that could ultimately be the key to turning things around. Just look at Netflix, whose streaming service only clicked after House of Cards turned it into a content powerhouse. Could Hulu’s Difficult People be the new Orange Is the New Black? “We’ve made significant steps toward [having a show break through to mainstream audiences],” says Erwich. “I don’t know if the fog has completely lifted, but I feel like we’re about to come through the other side.”